Now, professional investors are turning the once privately hoarded assets into publicly investable, diversified offerings for clients. In July, Ben Cleary, portfolio manager at Tribeca Investment Partners, helped raise US$50 million for a fund that holds rare pale-violet Argyle diamonds, with a minimum investment of US$1 million.
Institutionalising the asset class is also helping to lower the threshold for access, letting everyday investors in. Luxus, founded by former Blackstone veteran Dana Auslander, is trying to catch this trend by bringing diamond investments to retail investors at a lower price point. Though investors might not be able to afford a rare 11.7-carat yellow diamond, they will be able to own shares of it, and benefit when it is sold on. Luxus plans to IPO the US$1.7 million “Golden Dahlia” diamond in early September.
The broader push into collectibles has been catalysed, experts say, by cryptocurrency. Investment-grade wine has an average rate of return of about 10 per cent per year, according to LiveTrade. This felt sleepy compared to cryptocurrency — until crypto crashed earlier this year. “Crypto was a pull so far to the extreme, that everything behind it that felt so niche and esoteric before feels much more normal, and much less scary now,” says Tom Gearing, chief executive of wine trading platform Cult Wines.
Liquidity remains an issue for some areas of the collectibles market — including, ironically, wine. Funds that pool collectible assets for retail traders are nascent, but there are glimmers of the market broadening. Valt, the alternative investment start-up, pools assets such as collectibles for investors who want to own shares of Babe Ruth baseball cards and Bordeaux. Wine is soaring in popularity with retail as well as institutional traders — family offices make up close to half the market, according to brokers.
Still, some investors seek collectibles for a different kind of value. “We try to steer people towards looking at it for the merits of the asset versus a drink,” says Matthew O’Connell, chief executive of LiveTrade Bordeaux Index. “But I’d be lying if I said some wealthy investors didn’t occasionally dip into their portfolio.”
By Madison Darbyshire © 2022 The Financial Times.